Windows 7 fuels record Q4, fiscal year for Microsoft

Microsoft smashed Wall Street expectations Thursday by reporting record fourth-quarter revenue that was nearly $800 million more than expected, a whopping 48 percent jump in quarterly profit, and record annual revenue for its 2010 fiscal year.

Q4 FY10 revenue was $16.04 billion — a 22 percent from the year-ago period, when Microsoft reported its first-ever year-over-year revenue and earnings decreases. Analysts had expected Microsoft to bring in $15.27 billion in the quarter ended June 30.

Profit jumped 48 percent year over year, from $3.05 billion in Q4 FY09 to $4.52 billion, or 51 cents per share, in Q4 FY10. Earnings were fueled by continuing sales of Windows 7, the fastest-selling operating system in company history. Microsoft said it has sold more than 175 million Windows 7 licenses to date. The Windows and Windows Live division brought in $4.55 billion of revenue and operating income of $3.06 billion during the quarter.

“An outstanding quarter for the Windows division,” said Matt Rosoff, an analyst with Kirkland-based Directions of Microsoft. “And I really think that’s the reason Microsoft had a blowout quarter.”

View charts and graphs of Microsoft’s Q4 and FY10 earnings here, broken down by division.

The Redmond-based company escaped an indirect assault by Apple, which reported quarterly revenue of $15.7 billion on Tuesday. If Microsoft hadn’t beaten that number, it would have been the first time Apple’s revenue exceeded that of Microsoft.

Microsoft’s revenue for its fiscal year 2010 was $62.48 billion, a 7 percent increase from fiscal 2009. The company’s previous annual record was $60.42 billion, set in FY2008.

Net income for FY2010 was $18.76 billion, or $2.10 a share, up 29 percent from the year-ago period. Microsoft was hit hard by the recession during FY09; things were better for FY10.

Unearned revenue was $14.8 billion, up from last year’s figure of $14.28 billion. Unearned revenue is a good signifier of business deals Microsoft has signed with enterprise customers.

“What that means to me is business IT spending has picked up,” Rosoff said.

All of the company’s business divisions saw revenue jump by more than 10 percent, Bill Koefoed, Microsoft’s general manager of investor relations, told seattlepi.com. But the Online Services Division (essentially Bing) and the Entertainment and Devices Division (Xbox, Zune, Windows Phone) operated in the red during the quarter.

“We saw strong sales execution across all of our businesses, particularly in the enterprise with Windows 7 and Office 2010,” Kevin Turner, Microsoft’s chief operating officer, said in a news release. “Our transition to cloud services is well under way with offerings like Windows Azure and our Business Productivity Online Services, and we look forward to continuing our product momentum this fall with the upcoming launches of Windows Phone 7 and Xbox Kinect.”